Religare upgrades S-REITs to ‘buy’ on lower odds of Fed fund rate hike

SINGAPORE (July 4): The FTSE ST Real Estate Investment Trusts Index rallied 4.4% after the UK referendum on June 23, and Religare Institutional Research says it is likely that investors will continue to opt for risk-free investment strategies for an “extended period”.

Religare’s analyst Pang Ti Wee said in a note on Monday that Singapore Real Estate Investment Trusts (REIT) are looking more attractive to investors now, as he expects the post-Brexit process to be “a long drawn one” and does not expect the US Federal Reserve to raise fund rates in 2016.

At current levels, Singapore REITs are offering a yield spread of 450 basis points against Singapore 10 year bond yields. That contrasts with its historical 350 to 380 basis points. Pang estimates that there could still be an upside of 10%, with the sector’s stable outlook and investors’ flight to safety.

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